Escalation of violence in Libya extended rally of safe currencies as the Dollar and Yen rose against most currencies along with the Gold and Crude Oil although Japan's credit rating downgrade by Moody's saw some weakness creep into the Yen but the slide could be limited as S&P maintains the same outlook. EURCHF dropped to a two-week low of 1.2873 as EU investors sought the Franc as a refuge against a falling Euro, EURUSD traded at 1.3564 from yesterday's high of 1.3709, NZDUSD and NZDJPY dropped the most in three months to 0.7489 and 62.42 respectively after an earthquake measuring 6.3 struck Christchurch while USDJPY traded at high of 83.54 and EURJPY traded at a low of 112.88. The Middle Eastern crisis could continue longer, leading to weaker demand for high-yield currencies with the Dollar and Franc benefiting and the Euro continuing to be sold-off, Gold traded at a high of $1404 and Oil extended its rally to high of $97.60 on fears of oil disruptions as Libya is Africa's largest oil producer.
Asian stocks declined on speculations that political uncertainties in the Middle East will derail global economic recovery and as Moody's downgraded Japan's AA2 credit rating outlook to negative from stable on concern the government won't do enough to address the nation's debt burden. The MSCI Asia Pacific index dropped 1.8%, Nikkei dropped 1.8%, the first decline in seven days, Hang Seng dropped 1.9%, Shanghai Composite dropped 2.43% on fears rising oil prices could slowdown the economic recovery process as it could tax consumers and major airlines could suffer and earnings outlook could be lowered while the Topix index led the biggest drop since September by 1.8%.
Yesterday's ECB Stark said in a speech that the ECB is prepared to act quickly and decisively on inflation if necessary although it is to be decided whether the jump in inflation is temporary or would continue to increase in a projected manner adding that another round of easing could set aside ECB's future plans. His comments also suggested that ECB's bond purchase program could remain in place for some time to come which could add some support to the Euro as nations battle increasing budget deficit issues.
Today's calendar would show UK public sector borrowing figures, Canadian Retail Sales, US house price index which could show further decline in prices, Consumer confidence, manufacturing from Richmond area and Fed's Kocherlakota speaks today.